here’s ron paul (once again proven right by this current crisis) breaking down how the fed causes bubbles like our current housing bubble. side note: us govt stopped tracking money supply in 2006.

great graphs of how the american banking industry was slaughtered this year. $1 trillion lost, which roughly equal to the amount of new money printed by the govemment over last few years. to me this is a scary relationship – print tons of money, which then gets lost on stupid loans? waaay easier to lend money when you have a feeling you won’t have to pay it back….

here’s an interesting ny times article about an economist that predicted the current mortgage/housing crisis. he has a pretty gloomy outlook on the future of the america’s financial system.

excerpt:

“For months Roubini has been arguing that the true cost of the housing crisis will not be a mere $300 billion — the amount allowed for by the housing legislation sponsored by Representative Barney Frank and Senator Christopher Dodd — but something between a trillion and a trillion and a half dollars. But most important, in Roubini’s opinion, is to realize that the problem is deeper than the housing crisis. “Reckless people have deluded themselves that this was a subprime crisis,” he told me. “But we have problems with credit-card debt, student-loan debt, auto loans, commercial real estate loans, home-equity loans, corporate debt and loans that financed leveraged buyouts.” All of these forms of debt, he argues, suffer from some or all of the same traits that first surfaced in the housing market: shoddy underwriting, securitization, negligence on the part of the credit-rating agencies and lax government oversight. “We have a subprime financial system,” he said, “not a subprime mortgage market.”

Roubini argues that most of the losses from this bad debt have yet to be written off, and the toll from bad commercial real estate loans alone may help send hundreds of local banks into the arms of the Federal Deposit Insurance Corporation. “A good third of the regional banks won’t make it,” he predicted. In turn, these bailouts will add hundreds of billions of dollars to an already gargantuan federal debt, and someone, somewhere, is going to have to finance that debt, along with all the other debt accumulated by consumers and corporations. “Our biggest financiers are China, Russia and the gulf states,” Roubini noted. “These are rivals, not allies.”